June 06, 2013

Affordable Care Act - 4

The Patient Protection and Affordable Care Act (ACA)
represents a comprehensive expansion and restructuring of the United
States health care system whose most important and controversial
provisions for personal injury settlement planning, including the
individual mandate and elimination of pre-existing condition
restrictions, will become effective nationally on January 1, 2014.

Among the most fundamental and contentious ACA issues are whether, when and how the ACA will reduce health care costs.

Overtime,
the Chiplin and Lilly believe the ACA's spending and cost-containment
provisions should at least slow the health care spending curve. As this
New York Times article points out, there is mounting evidence to support Chiplin and Lilly's belief that a sustainable slowdown in health care costs is possible.

Health Insurance Exchanges

Chiplin and Lilly acknowledge ACA implementation will be a tough but doable challenge so long as we "let the tools of the ACA work". Among the implementation challenges they highlight are the new health insurance exchanges
, which states are authorized to establish for individuals and small
businesses. 26 states have refused to establish an exchange, thereby
defaulting to a federally-facilitated exchange.

Based on conflicting actuarial projections,
many insurance experts and commentators have predicted these insurance
exchanges will produce higher insurance rates, especially among younger,
healthier participants. Under the new ACA requirements,
insurers who participate in the exchanges are not permitted to refuse
individuals. Price variations and the right to rescind coverage are
restricted and annual and lifetime limits are eliminated. Individuals
can select one of four comparable plans (bronze, silver, gold, platinum)
with few out-of-pocket expenses.

California Exchange Report

On May 23, 2013, Covered California, California's new insurance exchange, published a Report ("Health Plans and Rates for 2014: Making the Individual Market in California Affordable")
that identified premium rates submitted by the participating health
insurance companies. Surprisingly, these premium rates appear to be
significantly less expensive than most forecasters projected.

"We’ve hit a home run for consumers,” announced Peter V. Lee, the executive director of the California exchange.

Many ACA proponents agree. For example, in his May 24, 2013 New Republic article ("California will be Spared the Obamacare Apocalypse: No Sticker Shock Here - Just Affordable Insurance Premiums"), Jonathan Cohn writes:

"Based
on the premiums that insurers have submitted for final regulatory
approval, the majority of Californians buying coverage on the state's
new insurance exchange will be paying less—in many cases, far less—than
they would pay for equivalent coverage today. And while a minority will
still end up writing bigger premium checks than they do now, even they
won't be paying outrageous amounts. Meanwhile, all of these consumers
will have access to the kind of comprehensive benefits that are
frequently unavailable today, at any price, because of the way insurers
try to avoid the old and the sick."

Conservative Reaction

Perhaps predictably, the conservative political reaction to the California insurance exchange report was dramatically different as evidenced by these headlines:

How can the same California insurance exchange report produce such radically different interpretations?

Proponents' Rebuttal

Jonathan Chait, an ACA proponent, provides an answer in his June 5, 2013 blog post titled "Is Obamacare a War on Bros?":

"Roy
compared California’s plans to the teaser rates available on
ehealthsurance.com. Those teaser rates turn out to bear little
resemblance to actually available health-insurance rates — they exclude
swaths of potential consumers for even minute health problems. Possibly
the most misleading part of Roy’s astonishingly dishonest screed is the
entry point for his pseudo-investigation...These columns keep citing a
healthy 25-year-old man as if they are offering up a randomly chosen
example of how the exchanges will work. Healthy non-smoking 25-year-old
males have very different health profiles than the average person."

Chait's comments echo similar criticism of Roy's analysis by Ezra Klein in his June 1, 2013 blog post titled "The Shocking Truth about Obamacare's Rate Shock":

"I ran the same search Roy did.....Click
to buy the plan and eventually you’ll have to answer pages and pages of
questions about your health history. Ever had cancer? How about an
ulcer? How about a headache? Do you feel sad when it rains? When it
doesn’t rain? Is there a history of cardiovascular disease in your
family? Have you ever known anyone who had the flu? The actual cost of
the plan will depend on how you answer those questions.”

"Comparing
the pre-underwriting price of this plan to those in Obamacare’s
exchanges is ridiculous. The plans in Obamacare’s exchanges have to
include those people. They can’t turn anyone away or jack up rates
because of a history of arthritis or heart disease. ...They also have to
offer insurance that meets a certain minimum standard."

In a follow-up to his May 24, 2013 New Republic article (cited above), Jonathan Cohn added his own rebuttal ("Anatomy of a Bogus Obamacare Argument: How an Irresponsible Forbes Writer Distorted the Debate") to Roy's article:

"Writers
like me who have supported the [ACA] treated [the California exchange
report] as a big deal. But I would like to think we were candid about
the downsides....and noted that California was just one state—and, in
some respects, a best-case scenario, because its officials are committed
to the law’s success and enjoy broad support from corporate, medical,
and consumer leaders. We also noted—as we had notedbefore—that
some young and healthy people would have to pay more. Again, a health
insurance system that no longer discriminates against the old and sick
can no longer discriminate in favor of the young and healthy. We also
acknowledged that getting the insurance bids is just one step in the
process. As many of us have written,plenty of things could go wrong with Obamacare—and at least a few of them surely will."

ACA and Settlement Planning

The future of the ACA
- and whether, when and how it will reduce health care costs - remains
uncertain in the context of continuing political debate and threats to
prevent its implementation. However, as key ACA provisions, including
the individual mandate and elimination of pre-existing condition
restrictions, are set to take effect January 1, 2014, settlement planning and structured settlement stakeholders should prepare themselves for a vastly different professional landscape.